I’ve mentioned several times that there are many instances where the HOA attorney could easily be seen as a co-conspirator against the homeowner. I cited civil court rule R 11(a) – found in all states – that says,
“that to the best of the signer‟s knowledge, information, and belief formed after reasonable inquiry [the document] is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose.”
In other words, the filing a suit to collect attorney fees, win or lose. Problem is that the HOA winds up paying when the homeowner does standup in court and demands evidence and facts. But, in any case, the attorney gets the $$$.
While this case does not involve unsubstantiated violations by the HOA, or unreasonable interpretations of the governing documents or statutes, it well illustrates a very important defense argument. In this Arizona case, CAI HOA attorney Maxwell contested HOA’s second position to the first mortgage lender’s lien, arguing that the statute applied to first mortgages in time only. Of course, there was the usual demand for attorney fees since the HOA lost. I guess that includes fees for the appeal, too.
The court found as to the good faith of the filing attorney that,
“The good faith component of Rule 11 is not based on whether an attorney subjectively pursues claims in good faith, but instead is judged on an objective standard of what a professional, competent attorney would do in similar circumstances . . . . The trial court determined sanctions were appropriate because there was “no statutory basis or any extension of statute that would lead counsel to presume that Plaintiff had priority over a first deed of trust filed by the Bank[s].”
The appellate court said it quite pointedly: “As discussed above, the language in § 33-1807 is clear and unambiguous. Yet, both here and below, VJA bases its arguments on an interpretation of the statute that is contrary to its plain language.”
Don’t be afraid to remind your attorney about this Rule 11(a) — they are usually hesitant to attack their fellow attorneys as they may be next so charged.
Villa de Jardins Assn v. Flagstar Bank, CA-CV 2010-0177, (Ariz. App. Div. 2, Apr. 22, 2011).
HOA Constitutional Government 
Homeowner members of Villa De Jardines Association should be more than simply troubled by the Court of Appeals’ Opinion, April 22, 2011, in Villa De Jardines Association v. Flagstar Bank, FSB, et al., 2 CA-CV 2010-0177.
The association’s board of directors, on behalf of all the dues paying members, should demand the costs and fees paid by the association to its counsel for its representation of the association in the trial and appeals court proceedings be refunded in full with interest at the legal rate of ten percent per annum from the date any monies were paid to the association’s counsel.
The Court of Appeals’ Opinion imposing sanctions against counsel pursuant to Rule 11, Ariz. R. Civ. P., denying its motions for a new trial and to reconsider/vacate the judgment, denying its application for attorney fees, awarding Flagstar its attorney fees and costs on appeal pursuant to Rule 25 and finding “a professionally competent attorney could not reasonably argue…pursuit of the trial and appeals court matters was objectively reasonable,” the members have been handed a roadmap to recovery from the association’s counsel by the Court of Appeals.
The members should take note the Court’s characterization of counsel’s argument(s), “confusing, unpersuasive, incongruent (sic) and objectively unreasonable (sic)” supporting their demand for a full refund of costs and fees from the association’s counsel.
In addition to a demand for reimbursement, the board of directors and/or one or more members should file a bar complaint against the association’s counsel.